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Broker tips: EasyJet, Volex
(Sharecast News) - Analysts at Liberum hiked their target price on low-cost carrier EasyJet from 500.0p to 650.0p on Wednesday, stating it was "shrugging off macro concerns". Liberum said a "positive" first-half trading update saw management raise guidance on strong demand and self-help measures.
"Macro risks to demand have been shrugged off, supporting our thesis that the lag in industry capacity restoration has left plenty of headroom for further recovery," said Liberum.
The investment bank increased its September 2023 earnings per share forecasts for EasyJet by 46%, highlighting the "extreme sensitivity" of earnings estimates to small improvements in revenues or costs.
In addition to raising its target price on EasyJet, Liberum also reiterated its 'buy' recommendation on the stock.
Analysts at Canaccord Genuity raised their target price on power products manufacturer Volex from 380.0p to 400.0p on Wednesday after the group's full-year trading update came in "strong and ahead of expectations"
Canaccord Genuity said Volex had seen "good demand" across structural growth markets including electric vehicle, complex industrial, and medical, which has driven share gains as supply chains improved through the year and boosted manufacturing output.
The Canadian bank stated reassuringly, new client wins and increased volume allocations had also allowed the group to "largely mitigate against a well-flagged normalisation of demand in consumer electronics" following the Covid-19 pandemic.
However, Canaccord thinks the most important piece of new information was that strong cash generation, in part due to some unwinding of strategic inventory, had driven "a significant deleveraging" of the group's balance sheet in H2.
"As a result, we think M&A may feature sooner rather than later once again to support the group's strategic growth ambitions. We have raised our forecasts to reflect the upgraded guidance for FY23E which subsequently lifts our outer year expectations. Adjusted EPS rises by 5%/3%/1% for FY23E/24E/25E, respectively," said Canaccord, which reiterated its 'buy' rating on the stock.
Reporting by Iain Gilbert at Sharecast.com
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